Marking Time Ahead of Powell’s Speech at 13:00 EST

November 8, 2023

Federal Reserve Chairman Powell is scheduled to speak today at the central bank’s Research & Statistics Division centennial conference. Vice Chairman Jefferson also will be making remarks there. Remarks by Fed officials since Powell’s press conference on November 1 have tended to be more hawkish than the perceived message of the FOMC a week ago, and investors are hoping to get some clarity on the matter of whether Fed interest rates have peaked and whether the sharp drop in long-term rates so far this month concerns officials.

In overnight stock market action, European share prices are up modestly, while U.S. futures are generally flat. Equities in the Pacific Rim closed down 1.4% in Singapore, 0.9% in South Korea, 0.7% in New Zealand, 0.6% in Hong Kong and Indonesia, 0.3% in Japan and 0.2% in China.

Ten-year sovereign debt yields have fallen three basis points in Germany, France, Italy, Spain and Japan, two bps in Great Britain and a basisĀ  point in the United States.

The dollar strengthened 0.2% overnight against the euro, loonie, and peso and has also risen 0.3% relative to the yen and sterling. The price of gold slid 0.2%, and crypto has barely moved.

A notable market development has been a 1.6% decline of West Texas Intermediate oil, which at $76.12 per barrel is its lowest since July 20.

A speech by Bank of England Governor Bailey echoed the sentiment of many central bankers around the world that it’s premature to talk about when interest rates might be cut.

But there has been some encouraging inflation news. Germany confirmed that consumer prices were unchanged on month during October and posted a 26-month low 3.8% 12-month rate of increase, down from 4.5% in September, 6.4% as recently as June, and a crest of 8.8% in the final quarter of 2022.

Likewise, Dutch CPI inflation of -0.4% last month matched the preliminary estimate and was the first year-on-year drop since mid-2016 and down from a record high of 14.5% in September 2022. CPI inflation in Latvia and Albania of 5.0% and 3.8% constitute respective 30-month and 21-month lows and represent deceleration from late-2022 peaks of 22.2% and 8.3%.

Chilean consumer price inflation has showed from a 30-year high of 14.1% in August 2022 to a 26-month low of 5.0% last month.

In other data news today, September retail sales volume in Euroland (-0.3%) failed to rise for the fifth time in six months, resulting in the largest year-on-year decrease in that half-year span.

Contrary to the aforementioned data attesting to falling inflation, a monthly consumer expectations survey of the European Central Bank revealed an eye-opening half percentage point jump in expected inflation over the coming year to 4.0%.

France experienced its largest current account deficit in seven months in September (EUR 2.531 billion), but the year-to-date shortfall of EUR 21.6 billion was roughly 32% less than a year earlier.

Japan’s September index of leading economic indicators slid to a 2-month low, but the 3-month high in the index of coincident economic indicators persuaded officials to designate that series trend to be improving. This favorable characterization was the sixth in a row. Unlike China where international reserves fell $14 billion last month, Japanese reserves posted a surprise $752 million increase.

Brazilian retail sales climbed 0.6% on month and by a 6-month high 3.3% on year in September.

The U.S. 30-year fixed mortgage rate declined 25 basis points last week to 7.61%, which compares with 7.9% in mid-October, and that more attractive level goosed mortgage applications to a 7-week high increase of 2.5%.

The National Bank of Poland left its interest rate benchmark unchanged at 5.75% at the November review. After a tightening cycle that lifted the rate from a pandemic low of 0.1% (May 2020-October 2021) to 1.75% by end-2021 and 6.75% by September 2022, monetary officials cut the rate to 6.0% in September and 5.75% last month. Polish CPI inflation has slowed from 18.4% last February to a 25-month low of 6.5% as of October.

Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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